Séminaire KTO-GREDEG-OFCE - Chengwei Liu (University of Warwick)

"In Search of Strategic Opportunities from Others’ Misattributions of Luck"
Quand ? Le 07-12-2017,
de 14:00 à 15:30
Où ? GREDEG - Salle Picasso
S'adresser à Renata Kaminska
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Séminaire KTO-GREDEG-OFCE : Chengwei Liu (University of Warwick)

In Search of Strategic Opportunities from Others’ Misattributions of Luck


Abstract: How performance is perceived and attributed has important implications for strategizing. But decades of research in cognitive and social sciences suggests that people tend to be fooled by randomness and mistake luck for skill when evaluating performances. We argue that these predictable mistakes can be translated into a source of competitive advantage: informed managers can exploit others’ misattributions of luck in performance evaluation, such as by arbitraging the resulting mispricing in strategic factor markets. To exploit a behavioral opportunity that results from others’ mistakes, asymmetries between a contrarian strategist and the rest are also necessary. We propose a framework with three behavioral filters that organizes existing socio-cognitive sources of biases to help search for asymmetries: strategic arbitrages are feasible when others are stumbled more on decision biases, learning traps or normative constraints than the strategist. More generally, this paper suggests an alternative source of strategic opportunity by turning well-known biases on their head and instead of seeing behavioral strategy as providing guidance on searching for behavioral opportunities with learning and social savvy.